News U Can Use
November 30, 2018
The Week that was…
26
th
November to 30
th
November
2
Indian Economy
• Government data showed that growth of the Indian economy slowed significantly in the
second quarter of FY19 after peaking in the first quarter. The slowdown came as
consumption demand moderated and the services sector remained subdued to some
extent. Gross Domestic Product (GDP) slowed to 7.1% in Q2FY19 from 8.2% in Q1FY19.
However, the growth rate was higher compared with 6.3% registered in the same period of
the previous year (Q2FY18). In gross value-added terms also, the growth of the Indian
economy moderated to 6.9% in Q2FY19 from 8.0% in Q1FY19.
• The growth of the Indian economy moderated across various sectors in the second quarter
of FY19. The growth rate of the manufacturing sector plunged to 7.4% in Q2FY19 from
13.5% in Q1FY19 and this might be due to higher input costs. Higher global crude oil
prices led to higher energy and fuel costs that increased input costs. Also, a weaker rupee
against the greenback might have increased the cost of production. The growth of the
agriculture sector slowed to 3.8% in Q2FY19 from 5.3% Q1FY19, which might be due to
irregular spatial distribution of monsoons and unprecedented floods in Kerala. The
financial, real estate and professional services sectors slowed to 6.3% in Q2FY19 from
6.5% in Q1F1Y9, which might be due to strain in the banking and telecom sectors.
• The growth of index of eight core industries came in at 4.8% in Oct 2018 as against 4.3%
in Sep 2018. Cement witnessed the maximum growth of 18.4%, followed by electricity and
coal sector that surged 11.4% and 10.6%, respectively. Fertilizer sector witnessed the
maximum decline of 11.5% and crude oil and natural gas went down 5.0% and 0.9%,
respectively. This is the 11th consecutive month that the crude oil sector witnessed
contraction.
3
Indian Equity Market
4
Domestic Equity Market Indices
Indices
30-Nov-18
1 Week Return
YTD Return
S&P BSE Sensex
36,194.30 3.47% 6.28%
Nifty 50
10,876.75 3.32% 3.29%
S&P BSE Mid
-Cap 15,039.35 1.07% -15.62%
S&P BSE Small
-Cap 14,427.16 0.53% -24.98%
Source: MFI Explorer
NSE Advance/Decline Ratio
Date Advances Declines
Advance/Decline Ratio
26-Nov-18 708 1,086 0.65
27-Nov-18 854 920 0.93
28-Nov-18 618 1,168 0.53
29-Nov-18 889 906 0.98
30-Nov-18 928 869 1.07
Source: NSE
• Indian equity markets were on a
winning streak gaining on all five
days of the week as crude oil prices
traded below the $60 per barrel level
and on the back of a strong rupee
against the greenback. Investors
turned optimist over the dovish policy
stance of the U.S. Federal Reserve
after its chairman stated that the
policy rate is below the neutral rate.
This could mean Fed might go slow
with interest rate hike in 2019.
• Investors also remained hopeful that
in the G20 summit U.S. and China
might make some progress on the
trade front, which would help reduce
tensions. The U.S. economic advisor
said the administration has opened
talks with China on all levels and the
chances of the two countries ironing
out issues at the upcoming G20
summit are encouraging.
Ratios
S&P BSE
Sensex
Nifty 50
S&P BSE
Mid Cap
S&P BSE
Small Cap
P/E
23.9 26.31 32.56 -84.78
P/B
3.03 3.44 2.6 2.14
Dividend Yield
1.19 1.22 0.97 0.87
Source: BSE, NSE Value as on Nov 30, 2018
Indian Equity Market (contd.)
5
Sectoral Indices
Indices
Last Returns (in %)
Closing* 1-Wk 1-Mth
S&P BSE Auto
20,900.2 2.45% 6.26%
S&P BSE Bankex
29,949.0 2.59% 7.43%
S&P BSE CD
20,526.5 2.50% 9.72%
S&P BSE CG
18,639.4 1.13% 8.55%
S&P BSE FMCG
11,647.3 2.73% 5.72%
S&P BSE HC
14,332.7 0.21% -0.72%
S&P BSE IT
14,296.7 6.35% 1.85%
S&P BSE Metal
11,831.9
-6.86%
S&P BSE Oil & Gas
13,246.2
1.79%
Source: Thomson Reuters Eikon
*Value as on Nov
30, 2018
• On the BSE sectoral front, most of the
indices closed in the green. S&P BSE
Bankex grew 2.59% during the week
under review.
• In the banking space, the RBI has relaxed
rules for non-banking financial companies
to sell or securitise their loan books. RBI
has decided to relax the minimum holding
period (MHP) requirement for originating
NBFCs, in respect of loans of original
maturity above 5 years, to receipt of
repayment of six-monthly instalments or
two quarterly instalments (as applicable).
Indian Derivatives Market Review
• Nifty Nov 2018 Futures settled at 10,858.7 points. Nifty Dec 2018 Futures were at
10,900.65 points, a premium of 23.90 points, over the spot closing of 10,876.75. The total
turnover on NSE’s Futures and Options segment for the week stood at Rs. 46.42 lakh
crore as against Rs. 37.39 lakh crore for the week to Nov 22.
• The Put-Call ratio stood at 0.99 compared with the previous week’s close of 0.86.
• The Nifty Put-Call ratio stood at 1.70 against the previous week’s close of 1.46.
Domestic Debt Market
6
Debt Indicators
(%)
Current
Value
1-
Wk
Ago
1-
Mth
Ago
6-
Mth
Ago
Call Rate
6.41 6.48 6.43 5.94
91 Day T
-Bill
6.75 6.78 6.96 6.39
7.80% 2021, (5
Yr GOI)
7.30 7.15 7.62 7.66
7.17% 2028, (10
Yr GOI)
7.61 7.71 7.83 7.78
Source: Thomson Reuters
Eikon
Value as on Nov 30, 2018
• Bond yields fell during the week
under review after the Reserve Bank
of India announced buying of bonds
worth Rs. 500 billion in Dec 2018 via
Open Market Operations (OMO) to
support banking system liquidity.
• Bond yields fell further following
sharp gains in the rupee against the
greenback and beneficial crude oil
prices that traded below the $60 per
barrel level. Investors were also
waiting for the outcome of meetings
between global leaders at the key G-
20 summit.
• Yield on the 10-year benchmark
paper (7.17% GS 2028) fell 10 bps to
close at 7.61% from the last week’s
close at 7.71%, after trading in a
range of 7.58% to 7.75%.
7.56
7.63
7.70
7.77
26-Nov 27-Nov 28-Nov 29-Nov 30-Nov
Yield in %
10 -Yr Benchmark Bond ( % )
Source: CCIL
Domestic Debt Market (Spread Analysis)
7
Maturity
G-
Sec Yield
(%)
Corporate Yield
(%)
Spread
bps
1 Year 7.30 8.48 118
3 Year 7.56 8.61 105
5 Year 7.66 8.48 82
10 Year 7.75 8.44 69
Source: Thomson Reuters Eikon
Value as on Nov 30
, 2018
• Yields on gilt securities fell across the
maturities in the range of 4 bps to 20 bps
barring 2-year paper that increased 1
bps.
• Corporate bond yields fell across the
maturities in the range of 3 bps to 10 bps
barring 1-year paper that increased by 4
bps.
• Difference in spread between AAA
corporate bond and gilt expanded across
the maturities by up to 9 bps barring 3- to
6-year papers that contracted by up to 2
bps.
-18
-12
-6
0
6.70
7.45
8.20
3 Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs
India Yield Curve Shift (%) (W-o-W)
Change in bps 30-Nov-18 23-Nov-18
Yield
in %
Change
in bps
Source: Thomson Reuters Eikon
Regulatory Updates in India
8
• The Securities and Exchange Board of India (SEBI) issued a framework as per which a
large number of corporates will have to raise 25% borrowings through corporate bonds from
FY20. The announcement comes in order to deepen the corporate bonds market. SEBI
stated that if the entities are unable to comply with the requirement, they will have to
provide explanation for such shortfall to the stock exchanges in a prescribed manner.
• The Reserve Bank of India lowered the hedging requirements for external commercial
borrowings (ECBs) of 3-5 years to 70% from 100%. The mandatory limit would
automatically be reduced to 70% at the time of rollover of the existing hedges. The
reduction in hedging requirements would help Indian companies in borrowing funds
relatively cheaply as hedging cost added up substantially to the final cost’.
• The National Stock Exchange (NSE) announced that it has received approval from SEBI for
the introduction of weekly derivatives contracts on USD-INR that will be launched from Dec
3, 2018. The managing director and chief executive officer of NSE stated that weekly
derivatives contracts will help participants limit time-related premium costs, thereby leading
to effective protection for their foreign exchange exposures.
• SEBI might issue a new rule known as side-pocketing as per which mutual funds will be
allowed to segregate distressed debt securities in their portfolios. With this new rule, the
fund houses will get the flexibility to carve out defaulting papers from the rest of the portfolio
to ensure the scheme’s net asset value (NAV) remains insulated.
Regulatory Updates in India (contd..)
• SEBI announced that it has issued a framework for interoperability among clearing
corporations (CCPs), which will be operational from Jun 1, 2019. Instead of going through
the CCP owned by the bourse on which the trade was executed, the interoperability would
allow the trading members to clear trades through a firm of their choice. Currently, different
bourses have their own CCPs that handle settlement of trades on the respective stock
exchanges.
• SEBI is allowing alternative investment funds (AIFs) to operate from International Financial
Services Centre (IFSC). With this allowance, IFSC is expected to emerge as the hotspot for
private equity funds and venture capitalists. The move is important as the Central
government has been making efforts to bring the fund management industry on shore from
current preferred destinations like Hong Kong and Singapore. However, these efforts have
brought in less results as substantially higher expenses are required for setting up of the
funds and also has higher tax incidence.
9
Global News/Economy
• According to the Commerce Department, economic growth in the U.S. was unrevised in the
third quarter. Real gross domestic product increased 3.5% in the third quarter, unrevised
from the initial estimate and in line with expectations.
• The U.S. Federal Reserve (Fed) chairman at his speech before the Economic Club of New
York described the present level of interest rates as "just below" neutral. Fed has raised
rates three times in 2018 to a range of 2 to 2.25% and has forecast another rate hike before
the end of the year.
• Minutes of U.S. Federal Reserve’s latest monetary policy meeting showed almost all
participants agreed for another increase in rates and it was "likely to be warranted fairly
soon." The meeting was held earlier in Nov 2018. The central bank noted a near-term rate
hike would depend on incoming information on the labour market and inflation coming in line
with or stronger than current expectations.
• National Bureau of Statistics data showed the manufacturing sector in China was stagnant in
Nov 2018. The manufacturing Purchasing Managers’ Index (PMI) score came in at 50.0,
lower than expectations. Non-manufacturing PMI came in at 53.4, again less than expected.
10
Global Equity Markets
11
Global Indices
Indices
30-Nov-18
1-Week
Return
YTD
Return
Dow Jones
25,538.5 5.16% 3.31%
Nasdaq 100
6,949.0 6.46% 8.64%
FTSE 100
6,980.2 0.39% -9.20%
DAX Index
11,257.2 0.58% -12.85%
Nikkei Average
22,351.1 3.25% -1.82%
Straits Times
3,117.6 2.13% -8.38%
Source: Thomson Reuters
Eikon
Value as on Nov 30, 2018
U.S.
• U.S. markets rallied as comments of
U.S. Federal Reserve chief led to
speculation that the U.S. central bank
might adopt a dovish stance on key
interest rate.
• Buying interest found additional strength
from growing optimism ahead of a
highly anticipated meeting between U.S.
President and Chinese President.
Europe
• European markets rose during the week supported by easing concerns over the Italian
budget and the Brexit agreement. According to media reports, the Italian government is
considering a deficit reduction for 2019 of up to 2% of GDP from the draft budget goal of
2.4% of GDP in order to avoid disciplinary action from Brussels. Meanwhile, European
Union leaders backed U.K.'s Brexit agreement and political declaration that sets up the
frame work of the future trade relationship.
Asia
• Positive cues from global peers helped Asian markets to end the week in the green.
Concerns over faster pace of U.S. interest rate hike took a backseat following comments
of U.S. Federal Reserve chief. Meanwhile, investors keenly awaited the outcome of the
highly anticipated meeting between U.S. and China at the G20 summit in Argentina.
Global Debt (U.S.)
12
• Yields on the 10-year U.S. Treasury fell
4 bps to close at 3.01% from the
previous close of 3.05%.
• U.S. Treasury prices initially fell driven
by surge in U.S. equities on optimism of
a robust holiday shopping season.
• However, the trend reversed after
minutes from U.S. Federal Reserve’s
latest policy meeting showed that
policymakers debated on when to pause
further hikes. Further, statement from
the U.S. Federal Reserve chief indicated
that an end to the bank's interest-rate
hike cycle is closer which added to the
gains.
• Prices grew further as market
participants preferred to remain on the
sidelines and awaited the outcome of
trade talks between U.S. President and
the Chinese President scheduled on
Dec 1, 2018 in the G-20 summit.
3.00
3.02
3.04
3.06
3.08
26-Nov 27-Nov 28-Nov 29-Nov 30-Nov
Yield in %
US 10-Year Treasury Yield Movement
Source: Thomson Reuters Eikon
Commodities Market
13
Performance of various commodities
Commodities
Last Closing*
1-Week Ago
Brent Crude($/Barrel)
57.55 56.83
Gold ($/Oz)
1,221.88 1,222.44
Gold (Rs/10 gm)
30,240 30,834
Silver ($/Oz)
14.17 14.24
Silver (Rs/Kg)
35,519 36,798
Source: Thomson Reuters
Eikon *Value as on Nov 30, 2018
Gold
• Gold prices traded flat as investors
focused on the highly anticipated
meeting between U.S. and China on the
sidelines of the G20 summit. Market
participants are hoping that the two
leaders would arrive at a deal that will
help ease trade war concerns and
prevent a global economic slowdown.
Brent Crude
• Brent crude prices managed to end the
week in the green, albeit trading below
the $60 per barrel level. Growing
expectation that Russia may agree to
reduce output at the Organization of the
Petroleum Exporting Countries (OPEC)
meeting scheduled in early Dec 2018 in
Vienna provided support to oil prices.
Baltic Dry Index
• The Baltic Dry Index rose 12.63% WoW
on the back of higher capesize and
panamax activities.
7.50
8.25
9.00
9.75
10.50
31-Oct-18 10-Nov-18 20-Nov-18 30-Nov-18
Global Commodity Movement
Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl)
Global
Commodity Prices
Rebased to 10
Source: Thomson Reuters Eikon
1.27%
-0.05%
-0.48%
Currencies Markets
14
Movement of Rupee vs Other Currencies
Currency
Last Closing*
1-Wk Ago
US Dollar
69.66 71.18
Pound Sterling
89.08 91.04
EURO
79.36 81.19
100 JPY
61.43 62.97
Source: RBI Figures in INR , *
Value as on
Nov 30, 2018
Rupee
• The Indian rupee rose against the
greenback for the third consecutive week
after comments by the U.S. Federal
Reserve chief indicated that the U.S.
central bank might not raise interest
rates aggressively moving ahead.
Euro
• The euro weakened against the
greenback after the European Central
Bank president acknowledged slowing
growth in the region.
Pound
• The pound weakened against the
greenback on growing concerns about
the British Parliament's vote on Brexit.
Yen
• The yen weakened against the
greenback as the safe haven appeal of
the latter rose on fears of a slowdown in
global economic growth.
9.30
9.60
9.90
10.20
31-Oct-18 10-Nov-18 20-Nov-18 30-Nov-18
USD GBP Euro JPY
Source: RBI
Currency
Prices (
in terms of INR)
Rebased to 10
Currency Movement
-2.14%
-2.15%
-2.25%
-2.45%
15
The Week that was…
26
th
November to 30
th
November
The Week that was (Nov 26 – Nov 30)
16
Date Events
Present
Value
Previous
Value
Monday,
November 26, 2018
• Japan Nikkei Manufacturing PMI (Nov P)
51.8 52.9
• Germany IFO Expectations (Nov)
98.7 99.7
Tuesday,
November 27, 2018
• U.S. Consumer Confidence Index (Nov)
135.7 137.9
• U.S. House Price Index (MoM) (Sep)
0.20% 0.40%
Wednesday,
November 28, 2018
• U.S. Advance Goods Trade Balance (Oct)
-$77.2b -$76.3b
• U.S. Gross Domestic Product Annualized (
QoQ
) (3Q S)
3.50% 3.50%
• Germany GfK Consumer Confidence (Dec)
10.4 10.6
Thursday,
November 29, 2018
• Germany Unemployment Claims Rate (Nov)
5.00% 5.10%
• Germany Consumer Price Index (YoY) (Nov P)
2.30% 2.50%
• U.S. PCE Core (YoY) (Oct)
1.80% 1.90%
• U.K. Mortgage Approvals (Oct)
67.086k 65.726k
• U.S. Initial Jobless Claims (Nov 24)
234k 224k
• U.S. Pending Home Sales (YoY) (Oct)
-4.60% -3.30%
• Japan Industrial Production (YoY) (Oct P)
4.20% -2.50%
Friday,
November 30, 2018
• India Gross Domestic Product (Q2 FY19)
7.10% 8.20%
• India index of Eight Core Industries (Oct)
4.80% 4.30%
• China Manufacturing PMI (Nov)
50.0 50.2
• Eurozone Consumer Price Index Estimate (YoY) (Nov)
2.00% 2.20%
17
The Week Ahead
3
rd
December to 7
th
December
18
The Week Ahead
Day Event
Monday,
December 3, 2018
•
India Nikkei Manufacturing PMI (Nov)
•
U.S. ISM Manufacturing (Nov)
•
U.K. Markit Manufacturing PMI (Nov)
•
Japan Monetary Base (YoY) (Nov)
Tuesday,
December 4, 2018
•
U.K Markit/CIPS Construction PMI (Nov)
Wednesday,
December 5, 2018
•
MPC Fifth Bi-monthly Monetary Policy Statement, 2018-19
•
India Nikkei Services PMI (Nov)
•
U.S. ISM Non-Manufacturing/Services Composite (Nov)
•
Japan Nikkei Composite PMI (Nov)
Thursday,
December 6, 2018
•
Germany Factory Orders (YoY) (Oct)
•
U.S. Initial Jobless Claims (Dec 1)
•
U.S. Factory Orders (Oct)
Friday,
December 7, 2018
•
U.S. Change in Non-farm Payrolls (Nov)
•
U.S. Unemployment Rate (Nov)
•
U.S. University of Michigan Sentiment (Dec P)
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19
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